Langton Capital – 2016-02-25 – Daily Wrap: Merlin, Sterling, commodity prices & other:
Leisure Wrap & Other:
So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following. As always, contact us if you’d like further details:
Merlin, just a thought before we get to the numbers:
• Didn’t Merlin shares come down last year (at the group’s H1 numbers in September) because the group said that a then-strong Sterling was putting off visitors to London from the Continent?
• Indeed they did.
• The company said on 17 Sept that ‘as previously anticipated, Midway Asia’s strong performance has been offset to an extent by softer trading in London where the strength of Sterling against the Euro continues to impact domestic and international visitor numbers.’
• This captured some headlines at the time and the group’s shares (post the Alton Towers’ crash in June) remained weak throughout most of the summer and autumn
• But now, of course, the currency boot is on the other foot.
• Certainly MERL’s shares have been strong but, we would perhaps suggest, not as strong as they maybe should have been given recent currency movements
Merlin full year numbers:
• These looked like good numbers and, indeed, they are.
• Ex the larger parks’ division, which has been held back by the crash at Alton Towers, Merlin’s 2015 performance has been very strong.
• LEGOLAND has been very good and it is here, as well as in the Midway Attracitions’ business, that MERL sees most growth over the medium term
• The outlook for 2016 is for further good trading, new benchmarks have been set for 2020 (see earlier email for detail) and the group has the credible ambition to add 2,000 hotel rooms, 40 Midway attractions and 4 new LEGOLAND parks over the next four years
• We believed that the shares’ weakness in the wake of the Alton Towers crash was a buying opportunity and, whilst nobody would seek to diminish the gravity of what happened on the Smiler ride in June, this has proven to be the case
• We expect to see some forecasts edged up and in addition believe that the group’s PER will continue to expand as the market takes on board the likelihood of the group’s further, predictable expansion
Random information, hopefully not all of it useless:
• Sharp equity bounce back going on. A risk-on day. Market well above 6k as we write.
• China was down 6% yesterday but markets in Europe today have forgotten about that.
• UK 50dy moving averages are being re-tested. Until recently we’ve been in a downtrend with chartists encouraged to remain bearish by the sequence of lower highs. That progression of lower peaks could be broken if we move above (and hold above) around the 6020 level on the FTSE100.
• Meanwhile, fundamentals remain tricky. Expected EPS growth across the Eurozone has been pulled back to 5.6% from 8.0% and company reports in many cases continue to disappoint.
• Sterling weak. Implications as previously discussed. Volatility (the odd bounce as well as weakness) is likely to remain a feature of the currency markets until the UK vote on 23 June.
• Oil price bouncing. Black stuff stuck at above $34 per barrel as we write.
• Hog prices on the rise (decent proxy for white meat) and cattle prices also moving slightly upwards (or at least stable). Hog prices +8% over the last 12mths but cattle price down by 12% or so.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. CEOs of Whitbread, Greene King and Diageo have all voiced their support for the UK remaining in the EU.
2. M&C Allegra Foodservice data shows Greggs and McDonald’s grew their share of food to go visits at lunch and dinner respectively
3. Carluccio’s could double in size and grow to perhaps 200 sites in the UK reports its co-founder & chairman Simon Kossoff
4. Fuller’s is to support British Pie Week from 7-13 March. It will be ‘showcasing the finest collection of hand-crafted pastry treats’
5. Rapidly-expanding online restaurant delivery platform, Deliveroo, has started a trial with BrewDog to deliver beer
6. Merlin reports FY numbers, says has turned in ‘robust financial results despite some challenging trading conditions’
a. Merlin FY: Visitor numbers up 0.3% at 62.9m, revenues +3.9% at £1.3bn, PBT+0.3% at £250m, EPS +0.4% at 17.8p and dividends +4.8% at 6.5p
b. Merlin FY: Says it has seen ‘continued strong performance in the LEGOLAND Parks Operating Group’. LfL revenues +8.2%
c. Merlin FY: Midway Attractions LfL sales +2.3% but Resort Theme Parks down 12.4% ‘despite strong start’ in wake of Alton Towers’ crash
d. Merlin FY: Says making ‘further progress towards the opening of LEGOLAND Dubai (2016), Japan (2017) and South Korea (2018)’
e. Merlin FY: Group sets out 2020 milestones. Wants 2k more rooms, 40 new Midway attractions and 4 new LEGOLAND parks
7. Playtech FY: Says has seen ‘another year of double-digit underlying revenue growth’. Revenues +38% at €630m.
8. More than 25% of Thomas Cook shareholders have voted against its pay policy at the company’s AGM
9. Minoan Group shares move higher on belief that has moved closer to gaining approval for Crete resort
10. Business travel clients reported to have increased their risk assessments in aftermath of the Paris attacks last November.
11. Crown Resorts, the biggest casino company in Australia, has reported a 22% fall in net profits to AUD$205m in H1 to Dec
12. Yorkshire-based budget gym chain, Xercise4Less, has secured a £7.6m investment from the Business Growth Fund
13. B of England Deputy Governor Jon Cunliffe has said that the UK central bank was ready to provide more stimulus if needed
a. IMF tells G20 that it should be prepared to implement more stimulus measures should the global economy threaten to stall